The market has enjoyed a very nice run lately, but after terse comments from politicians about a fiscal-cliff deal, worries developed and profit-taking ensued. The pullback was mild given how much the market has run, but the political theater was taken a little more seriously as the deadline for action nears.
My thesis recently has been that market players will remain optimistic despite the rhetoric until we are close to the deadline. With the holidays quickly approaching the real deadline is probably this Friday, and if something isn't nailed down by then, I expect to see more selling.
This is really a tough environment as end-of-year tendencies are trumped by the political debate. This time of year, stocks are less likely to move on their individual merits because tax issues, profit-taking and portfolio management drive the action. But it is even more difficult as we are so sensitive to the news headlines out of Washington.
The best advice I can give is to manage positions closely and don't be too focused on the news flow. If a stock doesn't act right, sell it and move on. If you have trouble putting cash to work, like me, then don't force it. Just keep pulling away and let the trades develop. The news is going to jerk us around, and we need to be aware that it may mess up what looks like a good trade.
Have a good evening. I'll see you tomorrow.